Sunday, March 14, 2010

British law firm 'conspired' to hide $50bn debts of Wall St giant

A top British law firm helped stricken banking giant Lehman Brothers hide its debts in the run-up to the bank's collapse, a report said yesterday.

Linklaters, one of the City's 'magic circle' law practices, signed off questionable accounting techniques to disguise $50billion (£36billion) debts.

The 2,200-page report, published yesterday in America, found that Linklaters allowed 'balance sheet manipulation' while investors remained in the dark as to what was going on.


Accused: Protestors hold signs behind Richard Fuld, former chairman of Lehman Brothers, as he takes his seat to testify at a Congressional hearing in 2008

Crucially, Lehman had turned to the UK after it failed to find an American law firm who would sign off the activities, the report said.

Linklaters advised Lehman that the accounting practice was allowed under English law.

The report was produced by U.S lawyer Anton Valukas, who was appointed by a judge to investigate the collapse of Lehman Brothers in September 2008.

It was the largest bankruptcy in American history and triggered a panic which brought the global economy to its knees. The domino effect resulted in the state bail-out of UK banks RBS and HBOS.

The disclosure that one of the country's largest and respected law firms was involved in controversial accounting practices will be an embarrassment to the City.

Mr Valukas found that Lehman had been insolvent for weeks before it filed for bankruptcy.

Executives had used a complicated transaction that enabled them to remove liabilities from Lehman's balance sheet for a short time, when results were due, and hide the true level of its debts. It was approved by Linklaters and signed off by the bank's auditors Ernst & Young.

The report found that Lehman used this transaction 'to create a materially misleading picture of the firm's financial condition in late 2007 and 2008'.

The Valukas report said: 'Unable to find a United States law firm that would provide it with an opinion letter permitting the true sale accounting treatment under United States law, Lehman conducted its... programme under the aegis of an opinion letter the Linklaters law firm in London wrote... under English law.'

There is no suggestion that Linklaters did anything illegal under English law. The firm said last night: 'The U.S. Examiner's report into the failure of Lehman Brothers includes references to English Law opinions which Linklaters gave in relation to a number of Lehman transactions.

'The Examiner - who did not contact the firm during his investigations - does not criticise those opinions or say or suggest that they were wrong or improper. We have reviewed the opinions and are not aware of any facts or circumstances which would justify any criticism.'

Mr Valukas found no evidence of extensive wrongdoing at Lehman, but said there were grounds for negligence and breach of duty actions against chief executive Dick Fuld and some colleagues.

He also found that Barclays, which bought a large chunk of Lehman's U.S. business after it filed for bankruptcy, received some assets it was not entitled to, including office equipment, but they were worth less than £6.6million.

Lehman Brothers in the Canary Wharf district

End of an era: A worker leaves the offices Lehman Brothers in the Canary Wharf, London after the bank was made bankrupt in September 2008. Thousands of workers lost their jobs

Is Catastrophe Ahead for US-China Relations? – Michel Chossudovsky

(RussiaToday) – United States-China relations are on the rocks recently, China says that they have been seriously disrupted. Essentially, China feels that it is being threatened by the United States and this has been mounting since 1999. The threats are coming in the form of diplomacy, however Michel Chossudovsky says that the United States also has missiles pointed at Chinese cities.

See Also:

(PressTV) – UK threatens China with isolation over Iran

The UK’s ambassador to Beijing has warned that China could face isolation internationally, should it fail to give its consent to fresh sanctions against Iran. Read More Here

Oil companies look at permanent refinery cutbacks

The response to slumping gasoline use would probably mean higher prices for drivers. Consumer advocates want regulators to examine the firms' plans.

Some of the nation's biggest oil companies are looking at permanently reducing how much gasoline and diesel fuel they make, a move that analysts say would almost certainly trigger higher prices for drivers.

Energy companies are suffering huge losses from refining because of slumping gasoline use -- a product of the economic downturn and changing consumer habits and preferences. Energy experts say refining cutbacks have begun and will accelerate as corporations strive for profits.

Major refiners have been circumspect about their plans, saying that they are considering options that could include closing refineries, selling parts of their operations, laying off workers and slashing spending.

"Refineries will have to be closed," said Fadel Gheit, senior energy analyst with Oppenheimer & Co. "Unless this excess capacity is permanently shuttered, a recovery in refining margins is unsustainable."

This week Chevron Corp. launched an overhaul of its fuel-making and retailing business with a plan to cut at least 2,000 jobs, put a refinery in Wales up for sale and take a hard look at its Hawaii refinery.

Royal Dutch Shell said it was reviewing its refinery operations with the idea of keeping only those with the best growth potential. Sunoco Inc. has sold one plant and said last month that its previously idled Eagle Point, N.J., refinery was being shut down permanently.

Valero Energy Corp., the nation's largest refiner, last year closed a Delaware refinery, laying off 500 workers, and mothballed a plant in Aruba.

"We're actually assessing the entire East Coast, whether we should be there or not," Valero Chief Executive William R. Klesse told executives at a recent energy conference.

Energy industry executives say they are facing up to what was previously inconceivable: that the nation's appetite for petroleum products may never return to levels seen earlier in the decade, even if a strong economic recovery takes hold.

"None of us will sell more gasoline than we did in 2007," Tony Heyward, group CEO for oil giant BP, said during a recent earnings teleconference.

For motorists, talk of refinery cuts promises to be anything but cheap. It's feared that leaner supplies will translate into higher pump prices punctuated by expensive spikes when operations are disrupted by weather or other events.

Avid travelers Peter and Kathie Woelper of Squaw Valley, Calif., find that a sobering prospect.

The Woelpers -- he's 71, she's 70 -- live on a fixed income. The couple just returned from a drive to the Vancouver Olympic Games in their 1997 Toyota RAV4, which gets 27 miles per gallon. Trips like that will become rare should gas prices soar.

"There's no reason why gasoline should be as expensive as it is right now, and we are down to a panic situation, money-wise," Peter Woelper said.

Consumer advocates want regulators to probe refinery closures and consolidations that slash supply.

"We know from internal documents from the last time we had a situation like this, in the 1990s, that there was an intentional strategy on the part of some companies to drive up profit margins by shuttering or closing refineries," said Tyson Slocum, director of Public Citizen's energy program.

"Consumer prices will be acutely sensitive to any significant change in refining capacity."

Judy Dugan, research director for Santa Monica-based advocacy group Consumer Watchdog, said that "closing or selling refineries to others who would limit production would be a serious case of corporate irresponsibility."

Refiners say they're merely trying to improve profits so they can keep making gasoline.

"There have been dozens of investigations by state and federal agencies, including some with subpoena power, and not one has ever found evidence of any conspiracy or collusion to manipulate prices," said Tupper Hull, spokesman for the Western States Petroleum Assn., an industry trade group.

If gasoline doesn't seem particularly cheap these days, that's because operators are keeping a tight lid on production; U.S. and European refineries are running at the lowest rate in more than a decade, Gheit said.

Still, compared with demand, there are too many refineries, he said, and an estimated 3 million barrels a day of excess capacity in the U.S. and Europe must disappear to achieve sustained improvement in earnings.

That would be like eliminating 10 refineries worldwide the size of the 270,000-barrel-a-day Chevron facility in El Segundo -- and its 1,000-plus jobs. Other estimates of excess refinery capacity are even higher.

Valero Energy provides a window into the industry's changing fortunes.

Five years ago, Wall Street loved the San Antonio firm. Valero had seen a fivefold increase in share price in 2005, and fourth-quarter earnings for that year were the company's best ever.

Now Valero finds itself in a much different position. It was nearly $2 billion in the red at the end of last year, and its fourth-quarter results were among the company's worst ever, with losses of about $1.4 billion.

The recession contributed to declining fuel demand. But in that same period, vast -- some think permanent -- changes happened.

Americans drove less and switched to vehicles that got better mileage or didn't use gasoline at all. They used mass transit in record numbers. Baby boomers began retiring and stopped commuting. And gasoline gained even more of something that didn't have to be refined from oil -- ethanol.

Few in the refining industry saw what was happening. The belief, particularly after hurricanes Katrina and Rita temporarily devastated the Gulf Coast petroleum network in 2005, was that more refineries were needed.

In the wake of the twin hurricanes, the average U.S. price of regular gasoline jumped nearly 18% to $3.07 a gallon -- a high for the year. In 2008, Hurricane Ike's disruption of refinery operations briefly took prices above $5 a gallon in some parts of the nation.

Critics complained that no new U.S. refinery had been built since 1976, leaving the country's gasoline supplies vulnerable. In fact, between 1998 and 2009, U.S. refining capacity increased by 2.2 million barrels a day, to 17.67 million barrels a day, with the addition of equipment and with improved processes at existing facilities, Energy Department data show.

Refiners raked in big profits from 2003 to 2006, but "by 2007, it was largely over," said Tom Kloza, chief oil analyst for the Oil Price Information Service, an energy information firm in Wall, N.J.

"Now, along with very weak demand numbers for gasoline, everything points to biofuels getting a larger and larger share in the future."

Some people worry that refiners may cut so much that price surges will become inevitable.

"The question is whether they are going to over-adjust," said Phil Flynn, an energy analyst for PFGBest Research. "Probably, they will."

Aging boomers face stark economics

Declining finances, rising health care costs threaten a generation

Image: Michael Blattman
Michael Blattman was laid off from his job as a senior vice president for a student loan company more than two years ago and still hasn’t found a new position.

Not so long ago, Michael Blattman lived in the upscale Washington, D.C., suburb of Potomac, Md., earning $225,000 a year as senior vice president for a student loan company. As he reached his 50s, it never really occurred to him that his job wouldn’t last forever.

“To be perfectly honest, I didn’t really go there,” he said. “Yeah, there was always a risk. Everything in business is a risk.”

In January 2008, Blattman, along with 500 other employees, was laid off by his company. With an $188,000 severance, he wasn’t worried at first.

“The barometer was always something like five or six months until you landed something comparable,” he said. “So I figured, ‘Oh, OK, six months?’ OK, I could do this for six months. And find the next one. Well, there was no next one.”

As his generation confronted an economic storm of historic proportions, Blattman found himself humbled — and living in a one-room apartment. After applying for 600 openings and getting only three interviews, he was still looking after two years.

His old boss recently gave him a stark assessment of his prospects.

“He said, ‘How’s it going?’” Blattman recalled. “I said, ‘Nobody’s talking to me.’ And he says ‘That’s because you’re an old white guy.’ And that stopped me in my tracks.”

Blattman gets some solace from the knowledge that he’s far from alone. More than 4 million baby boomers are unemployed, according to the Bureau of Labor Statistics. For many, retirement at 65 is no longer an option.

Facing shrinking nest eggs and mounting bills, they need to work, but they wonder if anyone will hire them again.

“The hardest thing each day is to get up and say, ‘OK, what am I going to do today?’ It’s a constant cheerleading effort every day. The thing is, I’m the cheerleader. And I am the team. So I’m all in one.”

Blattman starts every day checking out online job sites and sending out resumes for jobs that pay much less than his old salary.

“I have applied for jobs that are one-fourth, one-third of my previous income level,” he said. “And I would have been thrilled to get it. There are just too many of me and everyone else out there. I just wish there was a place for us, to kind of land.”

All the want, the wishing, can lead to worry and to stress.

“People who are in this position can have heart attacks, could get strokes, because of the intense stress levels,” said Blattman.

For Blattman, the chronic stress has induced him to grind his teeth, which has led to several root canals, damaged his implants, and worn away his bank balance. When his health insurance expired in August, he was left with $13,000 in out-of-pocket expenses.

It’s a double whammy: no job and no health insurance. Many boomers are in far worse shape than Blattman. Some have turned to free clinics. It’s just one indication that the health care crisis is really an economic crisis. And for the boomers it’s only going to get tougher, according to Harvard financial historian Niall Ferguson.

“If they’ve done their homework, then they’ll be afraid,” he said. “Very afraid.”

Ferguson says it won’t be easy to care for a generation with ailing bodies and many more years to live.

“The baby boomers have set us on a path towards a massive fiscal crisis,” he said. “Which is going to hit as the baby boomers retire.”

The recession, though devastating, will pass. But rising health care costs as boomers age may bring lasting harm to this generation’s financial well-being. By the time all boomers are 65, the senior population will have grown from 40 million now to about 72 million. Who will pay their medical bills?

“This thing is going to blow up,” said Ferguson, “because A: The number of retirees is about to zoom upwards just the way the number of teenagers once zoomed upwards in the ’50s, ’60s and ’70s; and B: Because the costs of these systems are completely out of control.”

The strain that the burden of caring for aging boomers will put on the health care system could overwhelm the economy.

If current trends continue, in 20 years almost a third of everything we spend on goods and services will be spent on medical care.

“The cost of health care for the elderly has been explosive,” said Ferguson. “And that is the crisis which seems to be the really big crisis lying ahead of us. We simply don’t have an answer as a society to the problem of a very large number of relatively unhealthy people who live into their 80s.”

Blattman and other boomers have woken up to a new reality. Their long-cherished belief that their lives would inevitably improve over time may no longer be true. It’s a cautionary tale for future generations.

“Never assume things will be better tomorrow than they are today,” he said. “It doesn’t mean you’re going to be worse off. Just don’t take things for granted and enjoy what you have.”

But he hasn’t given up hope. “Never,” he said.

Truth, History and Integrity by Gilad Atzmon

Back in 2007 the notorious American Jewish right-wing organization, the ADL (Anti-Defamation League) announced that it recognised the events in which an estimated 1.5 million Armenians were massacred as "genocide." The ADL's national director, Abraham Foxman, insisted that he made the decision after discussing the matter with ‘historians’. For some reason he failed to mention who the historians were, nor did he refer to their credibility or field of scholarship. However, Foxman also consulted with one holocaust survivor who supported the decision. It was Elie Wiesel, not known for being a leading world expert on the Armenian ordeal.

The idea of a Zionist organization being genuinely concerned, or even slightly moved, by other people’s suffering could truly be a monumental transforming moment in Jewish history. However, this week we learned that the ADL is once again engaged in the dilemma of Armenian suffering. It is not convinced anymore that the Armenians suffered that much. It is now lobbying the American congress not to recognize the killings of Armenians as ‘genocide. This week saw the ADL speaking out against Congressional acknowledgment of the Armenian Genocide, and is, instead, advocating Turkey’s call for a historical commission to study the events.”

How is it that an event that took place a century ago is causing such a furor? One day it is generally classified as ‘genocide’, the next, it is demoted to an ordinary instance of one man killing another. Was it an ‘historical document’ that, out of nowhere, popped out on Abe Foxman’s desk? Are there some new factual revelations that led to such a dramatic historical shift? l don’t think so.

The ADL’s behaviour is a glimpse into the notion of Jewish history and the Jewish understanding of the past. For the nationalist and political Jew, history is a pragmatic tale, it is an elastic account. It is foreign to any scientific or academic method. Jewish history transcends itself beyond factuality, truthfulness or correspondence rules with any given vision of reality. It also repels integrity or ethics. It by far prefers total submission, instead of creative and critical thinking. Jewish history is a phantasmic tale that is there to make the Jews happy and the Goyim behave themselves. It is there to serve the interests of one tribe and that tribe only. In practice, from a Jewish perspective, the decision whether there was an Armenian genocide or not is subject to Jewish interests: is it good for the Jews or is it good for Israel.

Interestingly enough, history is not a particularly ‘Jewish thing’. It is an established fact that not a single Jewish historical text has been written between the 1st century (Josephus Flavius) and early 19th century (Isaak Markus Jost). For almost 2 thousand years Jews were not interested in their own or anyone else’s past, at least not enough to chronicle it. As a matter of convenience, an adequate scrutiny of the past was never a primary concern within the Rabbinical tradition. One of the reasons is probably that there was no need for such a methodical effort. For the Jew who lived during ancient times and the Middle Ages, there was enough in the Bible to answer the most relevant questions to do with day-to-day life, Jewish meaning and fate. As Israeli historian Shlomo Sand puts it, “a secular chronological time was foreign to the ‘Diaspora time’ that was shaped by the anticipation for the coming of the Messiah.”

However, in the mid 19th century, in the light of secularisation, urbanisation, emancipation and due to the decreasing authority of the Rabbinical leaders, an emerging need of an alternative cause rose amongst the awakening European Jews. All of a sudden, the emancipated Jew had to decide who he was and where he came from. He also started to speculate what his role might be within the rapidly opening Western society.

This is where Jewish history in its modern form was invented. This is also where Judaism was transformed from a world religion into a ‘land registry’ with some clearly devastating racially orientated and expansionist implications. As we know, Shlomo Sand’s account of the ‘Jewish Nation’ as a fictional invention is yet to be challenged academically. However, the dismissal of factuality or commitment to truthfulness is actually symptomatic of any form of contemporary Jewish collective ideology and identity politics. The ADL’s treatment of the Armenian topic is just one example. The Zionist’s dismissal of a Palestinian past and heritage is just another example. But in fact any Jewish collective vision of the past is inherently Judeo-centric and oblivious to any academic or scientific procedure.

When I was Young

When I was young and naïve I regarded history as a serious academic matter. As I understood it, history had something to do with truth seeking, documents, chronology and facts. I was convinced that history aimed to convey a sensible account of the past based on methodical research. I also believed that it was premised on the assumption that understanding the past may throw some light over our present and even help us to shape a prospect of a better future. I grew up in the Jewish state and it took me quite a while to understand that the Jewish historical narrative is very different. In the Jewish intellectual ghetto, one decides what the future ought to be, then one constructs ‘a past’ accordingly. Interestingly enough, this exact method is also prevalent amongst Marxists. They shape the past so it fits nicely into their vision of the future. As the old Russian joke says, “when the facts do not conform with the Marxist ideology, the Communist social scientists amend the facts (rather than revise the theory)”.

When I was young, I didn’t think that history was a matter of political decisions or agreements between a rabid Zionist lobby and its favorite holocaust survivor. I regarded historians as scholars who engaged in adequate research following some strict procedures. When I was young I even considered becoming an historian.

When I was young and naive I was also somehow convinced that what they told us about our ‘collective’ Jewish past really happened. I believed it all, the Kingdom of David, Massada, and then the Holocaust: the soap, the lampshade*, the death march, the six million.

As it happened, it took me many years to understand that the Holocaust, the core belief of the contemporary Jewish faith, was not at all an historical narrative for historical narratives do not need the protection of the law and politicians. It took me years to grasp that my great-grandmother wasn’t made into a ‘soap’ or a ‘lampshade’*. She probably perished out of exhaustion, typhus or maybe even by mass shooting. This was indeed bad and tragic enough, however not that different from the fate of many millions of Ukrainians who learned what communism meant for real. “Some of the worst mass murderers in history were Jews” writes Zionist Sever Plocker on the Israeli Ynet disclosing the Holodomor and Jewish involvement in this colossal crime, probably the greatest crime of the 20th century. The fate of my great-grandmother was not any different from hundreds of thousands of German civilians who died in an orchestrated indiscriminate bombing, because they were Germans. Similarly, people in Hiroshima died just because they were Japanese. 1 million Vietnamese died just because they were Vietnamese and 1.3 million Iraqis died because they were Iraqis. In short the tragic circumstances of my great grandmother wasn’t that special after all.

It Doesn’t make sense

It took me years to accept that the Holocaust narrative, in its current form, doesn’t make any historical sense. Here is just one little anecdote to elaborate on:

If, for instance, the Nazis wanted the Jews out of their Reich (Judenrein - free of Jews), or even dead, as the Zionist narrative insists, how come they marched hundreds of thousands of them back into the Reich at the end of the war? I have been concerned with this simple question for more than a while. I eventually launched into an historical research of the topic and happened to learn from Israeli holocaust historian professor Israel Gutman that Jewish prisoners actually joined the march voluntarily. Here is a testimony taken from Gutman’s book

"One of my friends and relatives in the camp came to me on the night of the evacuation and offered a common hiding place somewhere on the way from the camp to the factory. …The intention was to leave the camp with one of the convoys and to escape near the gate, using the darkness we thought to go a little far from the camp. The temptation was very strong. And yet, after I considered it all I then decided to join (the march) with all the other inmates and to share their fate " (Israel Gutman [editor], People and Ashes: Book Auschwitz - Birkenau, Merhavia 1957).

I am left puzzled here, if the Nazis ran a death factory in Auschwitz-Birkenau, why would the Jewish prisoners join them at the end of the war? Why didn’t the Jews wait for their Red liberators?

I think that 65 years after the liberation of Auschwitz, we must be entitled to start to ask the necessary questions. We should ask for some conclusive historical evidence and arguments rather than follow a religious narrative that is sustained by political pressure and laws. We should strip the holocaust of its Judeo-centric exceptional status and treat it as an historical chapter that belongs to a certain time and place

65 years after the liberation of Auschwitz we should reclaim our history and ask why? Why were the Jews hated? Why did European people stand up against their next door neighbours? Why are the Jews hated in the Middle East, surely they had a chance to open a new page in their troubled history? If they genuinely planned to do so, as the early Zionists claimed, why did they fail? Why did America tighten its immigration laws amid the growing danger to European Jews? We should also ask for what purpose do the holocaust denial laws serve? What is the holocaust religion there to conceal? As long as we fail to ask questions, we will be subjected to Zionists and their Neocons agents’ plots. We will continue killing in the name of Jewish suffering. We will maintain our complicity in Western imperialist crimes against humanity.

As devastating as it may be, at a certain moment in time, a horrible chapter was given an exceptionally meta-historical status. Its ‘factuality’ was sealed by draconian laws and its reasoning was secured by social and political settings. The Holocaust became the new Western religion. Unfortunately, it is the most sinister religion known to man. It is a license to kill, to flatten, no nuke, to wipe, to rape, to loot and to ethnically cleanse. It made vengeance and revenge into a Western value. However, far more concerning is the fact that it robs humanity of its heritage, it is there to stop us from looking into our past with dignity. Holocaust religion robs humanity of its humanism. For the sake of peace and future generations, the holocaust must be stripped of its exceptional status immediately. It must be subjected to thorough historical scrutiny. Truth and truth seeking is an elementary human experience. It must prevail.

*During WWII and after it was widely believed that soaps and lampshades were being mass produced from the bodies of Jewish victims. In recent years the Israeli Holocaust museum admitted that there was no truth in any of those accusations.

The Stunning Fact That Connects Every Single Toyota Case

Does Prius Sudden Acceleration Syndrome (PSAD) discriminate against the young?

As Theodore Frank at the Washington Examiner points out, here are the reported ages of all 24 of the fatal Toyota (TM) cases:

60, 61, 63, 66, 68, 71, 72, 72, 77, 79, 83, 85, 89

Could it be that Toyota's PR crisis is actually a crisis of older folks improperly slamming on the pedals, and not some mysterious manufacturing glitch?

Lawmakers get eviction notices

Budget crunch means state is slow to pay office rents

The state's money problems are so bad that lawmakers are getting eviction notices and calls from collection agencies about their offices back home.

At least five state senators say they've piled up so much unpaid rent, sheepish landlords are asking them when the government plans to make good on its bills.

"He said, ‘Ira, I'm sorry,'" said Sen. Ira Silverstein, D-Chicago, recalling a visit from his landlord delivering an eviction notice. "And what am I going to do? I can't argue with the man."

While none of the lawmakers has actually gotten the boot yet, they are getting a taste of the frustratingly slow pace at which the state pays bills as it careens toward a $13 billion budget hole. It's a pain that's magnified exponentially for school districts, drug rehabilitation counselors and businesses awaiting tax refunds.

"It certainly puts us in a position of looking like deadbeats," said Sen. Mike Jacobs, an East Moline Democrat who got an eviction notice last year from a longtime friend who has rented the same building for years to the senator and his father before him. Payment eventually arrived — nine months late — but Jacobs was prepared to pay if the state had failed to come through.

A notice threatening eviction startled freshman Sen. Dan Duffy, a Lake Barrington Republican. Unsure when the state will cough up the $10,000 it owes his landlord, Duffy is scrambling to see if he can take refuge in a nearby secretary of state driver's license outlet or a local library should he eventually get evicted.

"When they can't pay the rent of a Senate office, there's no way they're going to be able to pay the hundreds of millions of dollars in bills that they have back due," Duffy said. "It just shows what a tragic crisis we're in and how far out of hand this is."

In the grand scope of what ails state government, the lawmakers all said they recognized late rent for Senate offices is far from the most pressing budget issue.

Each senator receives $83,063 a year as a district office allowance, and the bills end up at the comptroller's office.

Every day, comptroller workers sift through bills for all of state government and prioritize what must be paid and what has to wait. Each month, $2 billion is set aside. The state must make payments to schools and repay short-term loans. It must pay hospitals, nursing homes and doctors caring for Medicaid patients within 30 days in order to get the best return from the federal government.

Languishing further back in line are the bills to pay rents for lawmaker district offices.

Steve Brown, spokesman for House Speaker Michael Madigan, D-Chicago, said he knew of no eviction notices going to House members, but has heard that some legislators "on the brink" have had to dip into their own pockets or campaign funds to pay landlords or keep phone service.

Getting utility bills paid in a timely fashion has been a problem for Sen. John Jones, R-Mount Vernon.

"I've heard from collection agencies every month on the power bill and the phone bill," Jones said. The state once fell seven months behind on his district office's $900-a-month rent, and he recalled the landlord saying, "I gotta pay my bills, and I need my money."

Sen. Dan Kotowski, D-Park Ridge, said the state may be as much as one year and $24,000 behind on his office's lease payments and that he's had to dip into campaign funds to make phone payments.

"Service was shut down," Kotowski said. "I wasn't able to communicate with my constituents, and constituents were not able to communicate with me, and I just decided to use other funds to pay for it."

Silverstein said his landlord did get a payment after the senator received the eviction notice, at least temporarily defusing the situation.

But Silverstein's landlord, Demetrios Spyrakos, said Friday he hasn't received rent payments since October. He's owed more than $12,000 from the state.

Spyrakos blames Gov. Pat Quinn, who's tried but failed to get an income tax increase approved. The Jamestown Realty co-owner said he thinks Silverstein is a "good person, but I've been asking for the rent. He's trying, but nobody listens to him or to me."

Silverstein, whose office is in the West Rogers Park neighborhood, might have to find a new place to work out of soon.

"If I don't get my money by next month, I have to ask him politely to leave and try to find another tenant," Spyrakos said. "What else can you do? I can't wait forever. Who's going to pay my bills?"

It's the first time Spyrakos has rented to a politician.

"And I think it's going to be my last."

Option ARMs, 55 Percent of Jumbo California Loans are ARMs, 794,000 Distressed Properties, and Failed Loan Modifications.

An updated chart highlighting the option ARM and exotic mortgage loans made during the height of the bubble still shows us that many loans will go bad in the next couple of years. We need to remember that the vast majority of troubled option ARMs were made from 2004 to 2007. While analysts claim that there will be no reset problems, courtesy of low interest rates, the real problem stems from the recast of the mortgage. Much of this is typically hidden until it explodes like a financial time bomb. The reason this issue has somewhat lost steam in 2010 is that now, the really toxic loans are segregated into a handful of states including California, Florida, Arizona, and Nevada. If you live in these states, be prepared for additional bumps in the housing road ahead.

Let us look at this new updated chart and try to figure out what is really going on with option ARMs but also with other toxic loans in states like California:

Source: SNL, Credit Suisse

The data released only this month, highlights that between 2010 and 2012 some $253 billion of option ARMs will adjust and another $163 billion in Alt-A loans will reset. This is extremely troubling because most of these loans were made in states that experienced the brunt of the subprime disaster. You can imagine this hitting in a two wave fashion. First, the subprime wave filtered through and now the option ARM and Alt-A wave will cast a shadow but only on a select number of states. This older chart shows this two wave process:

Source: Amherst Securities

For the last few months we have been in the eye of the hurricane. While wave one has largely passed, wave two is only beginning to gear up. One of the ideas being bandied about is that nothing will come from this second wave. The assumption is all will be well. We bought some time with the government loan modification programs known as HAMP but after almost one year of the program, only 168,000 permanent loan modifications have been made nationwide and many of the option ARMs don’t even qualify for this. Banks have been trying to figure out what they can do with option ARMs but not much can be done because many of the borrowers do not or cannot continue to make payments on the loan.

Some staggering data from a Fitch report released late in 2009:

94% of borrowers made minimum payment only*

46% of all option ARMS were 30+ days late (with only 12% hitting recast)

Average loan-to-value ratios up to 126%

*With minimum payment loan balance increases through negative amortization

The above data was released back in September 2009 and most of the option ARMs are in California (roughly 50 to 60 percent). Since that time housing prices in the state have not gone up. So it is highly likely that more option ARMs are 30+ days late and LTV ratios are even worse as balances continue to grow while asset prices remain stagnant or retreat. It is understandable that following nationwide coverage of the housing problem can ignore the option ARM issue because it is pinned on only a few states. But these states will continue to face issues as these loans linger in financial limbo. If we look at some of the option ARM lenders like WaMu (many are now gone) we can see how concentrated they were in only a handful of states:

The above is from the $52.9 billion option ARM portfolio of WaMu in 2008, at a point when the option ARM spigot had turned off. WaMu had 50% of its option ARM loans in California. If we add in Florida, that number jumps to 62%. So this really is a problem that will hit a few states squarely. But to understand the depth of this, let us first get an actual number of loans in California:

California Housing Units with a Mortgage: 5,290,276

Source: Census, 2008 American Community Survey

We then have to figure out how many loans are currently in some form of distress or in foreclosure:

“(MBAA) The delinquency rate includes loans that are at least one payment past due but does not include loans in the process of foreclosure. The percentage of loans in the foreclosure process at the end of the fourth quarter was 4.58 percent, an increase of 11 basis points from the third quarter of 2009 and 128 basis points from one year ago. The combined percentage of loans in foreclosure or at least one payment past due was 15.02 percent on a non-seasonally adjusted basis, the highest ever recorded in the MBA delinquency survey.

The latest mortgage data shows us that 15.02 percent of all mortgages are 30+ days late or in the foreclosure process. Now California has more troubles because of the option ARM concentration but we’ll be conservative and use the 15.02 percent figure:

5,290,276 * 15.02 percent = 794,599 properties 30+ days late or in foreclosure

I ran the numbers a few days back and found that only 154,000 properties are listed on the MLS in California. So what is going on with those 600,000+ properties that are 30+ days late or in foreclosure? Wells Fargo which acquired a large option ARM portfolio from failed Wachovia tried a few adjustments but they seem to be more extend and pretend methods of stalling the inevitable:

“(CNBC) Pay option ARMs are the new subprime, defaulting at high rates now thanks to adjustments as well as good ol’ unemployment. According to its Q3 earnings report, Wells Fargo, the fourth largest U.S. bank by assets, has $79.2 billion in debt on these loans alone, down from $101 billion a year ago, in addition to other ARMs and fixed-rate loans and full-term loan modifications. Wells didn’t make the Pick-a-Pay loans, they just inherited them when they bought Wachovia at the beginning of this year. Wachovia relished in selling these risky products in the most overheated housing markets. Suffice it to say, many many many of these borrowers are way way way underwater on their loans.

Enter the interest-only product, which will allow borrowers to defer their balances from 6 to 10 years. This keeps the borrowers in their homes, paying a little every month. I called over to Wells Home Mortgage and spoke with CFO Franklin Codel. He told me that Wells has written down principal on the “vast majority of these loans.” Yep, just given that debt away, written down so far the tune of $2 billion, or about $46,000 per modified loan. So far Wells has turned about 43,500 Pick-A-Pays into interest-only ARMs.”

Since that time, mortgage distress has risen to a historic 15.02 percent and in California, there is little reason to believe the rate is any lower. The above adjustment is yet to be seen as helping any sizeable number of borrowers. It is also the case that banks have been reluctant to do any kind of principal reduction because this would force the bank to realize the actual loss on their balance sheet. In other cases loans have been extended out to 40 years with lower rates but as HAMP has shown, even this isn’t enough to make a change if you have no job:

Source: HAMP

Only 168,000 permanent loan modifications have occurred through HAMP. What needs to be remembered that over the last decade, housing has shifted into a commodity where very little value is placed on the home as a place to set your roots and instead became a place to count your home equity. With much of the equity stripped out, how many people will want to continue supporting a high mortgage when the home isn’t worth that value? A handful of studies have shown that the number one predictor of foreclosure is negative home equity. Virtually every option ARM in California is in a negative equity spot so that probably means 70 to 90 percent foreclosures on these places once we roll through the next wave.

What will banks do? Well so far they have shown us that ignorance is bliss. They have left the mortgages at face value and have no desire in pursuing a foreclosure (at least for now). Why would they? Say they have a $500,000 option ARM on a home now worth $250,000. The loan has now grown to say $575,000 because of negative amortization but the borrower stopped paying once a recast was hit. The bank can now claim an asset of $575,000 and lose $3,000 or $4,000 a month in missed monthly payments or realize a loss of $250,000 to $300,000 by foreclosing on the home. So we may not see a big tsunami hitting us all at once but the wave will hit and it will be painful and drawn out.

In fact, if we pull data on some of the areas in California we will see entire blocks with massive amounts of distress:

Source: Foreclosure Radar

Just look at the estimated equity column. Most of these homes don’t even show up in the MLS. But these are massive losses. If we look at the loan data we find a few option ARMs and a few familiar names including IndyMac.

Yet that isn’t the only problem falling on a state like California. There is also a number of jumbo loans:

California has 845,000 active jumbo loans. And a large number are already in foreclosure or are now 30+ days late. These loans carry big balances. What is even more troubling is 55% of jumbo loans are adjustable rate mortgages. With mortgage rates slated to increase this year, we can expect the foreclosure rate to zoom up.

The option ARMs, the Alt-A toxic loans, jumbo loan issues, and a 12.5 percent unemployment rate the highest in recorded history tells us the next wave will hit. The mainstream media isn’t covering this because it really is a state specific problem. But that is of little solace for those that live in sunny California.

Neocon Glenn Beck on Jesse Ventura 03/09/10

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Gerald Celente: Financial cons run Wall Street

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CrossTalk on 9/11: Whodunit?

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CUI BONO??? THE Reason for the Recent Media Attack on Toyota


Think about how quickly we wouldn't need the Persian Gulf Oil.

No more Blood for Oil ?
Note: I drive a Jeep - this is not a commercial endorsement. The price of these vehicles is dropping and their efficiency is increasing. I've driven them as rental cars - they exceeded my expectations in many ways.

U.S. Budget Deficit Grows $1 Million Every 11 Seconds

Between enormous expenditures and sagging revenues, the U.S. government in February managed to enlarge the deficit by $1 million every 11 seconds. February went down as the worst ever for monthly shortfalls, at $220.9 billion. This total was 14% higher than February 2009, which set the previous record. February is traditionally a bad month for deficits because that is when the government sends out tax refund checks.

The government is on pace to set the record for annual budget deficits, with 2010 figuring to be $1.56 trillion. Last year, it was $1.4 trillion. Things probably won’t get better in 2011, which is expected to post at least a $1 trillion gap. If this happens, it will mark the first time in U.S. history that the country endured three straight years of $1 trillion-plus deficits.
-Noel Brinkerhoff
U.S. Monthly Budget Deficit Balloons to a Record (by Meena Thiruvengadam and Jeff Bater, Wall Street Journal)
Budget Deficit Sets Record in February (by Martin Crutsinger, Associated Press)
Monthly Treasury Statement (Financial Management Service) (pdf)

Young war veterans returning home to unemployment

Government finds 21.1 percent unemployment rate for young veterans of Iraq, Afghanistan wars

The unemployment rate last year for young Iraq and Afghanistan veterans hit 21.1 percent, the Labor Department said Friday, reflecting a tough obstacle combat veterans face as they make the transition home from war.

The number was well above the 16.6 percent jobless rate for non-veterans of the same ages, 18 to 24.

As of last year, 1.9 million veterans had deployed for the wars since the Sept. 11, 2001, terrorist attacks. Some have struggled with mental health problems, addictions, and homelessness as they return home. Difficulty finding work can make the adjustment that much harder.

The just-released rate for young veterans was significantly higher than the unemployment rate of young veterans in that age group of 14.1 percent in 2008.

Many of the unemployed are members of the Guard and Reserves who have deployed multiple times, said Joseph Sharpe, director of the economic division at the American Legion. Sharpe said some come home to find their jobs have been eliminated because the company has downsized. Other companies may not want to hire someone who could deploy again or will have medical appointments because of war-related health problems, he said.

"It's a horrible environment because if you're a reservist and you're being deployed two or three times in a five-year period, you know you're less competitive," Sharpe said. "Many companies that are already hurting are reluctant to hire you and time kind of moves on once you're deployed."

One veteran looking for work is Dario DiBattista, 26, of Abingdon, Md., a graduate student who did two tours in Iraq in the Marine Reserves with a civil affairs unit. He said he's found that a lot of military skills don't readily transfer into the workplace, and in many cases, there aren't jobs to apply for even if companies want to hire veterans.

"If you don't have a strong family support system ... it's hard to get over the hump to make the decision of where you're going to live, what you do for work, where you're going to go to school, if you can even qualify to get into school," DiBattista said.

Justin Wilcox, a 30-year-old Iraq veteran who is participating in a work-study program at a vet center operated by the Veterans Affairs Department in Charleston, W.Va., said he hasn't just had problems finding jobs, but keeping them. He's done work as a coal miner, as a salesman selling drill bits and in other positions, but he said mental health problems stemming from the war with side effects such as anger and difficulty concentrating have made it difficult.

There's a lack of understanding about the needs some veterans have, said Wilcox, who is studying to become a teacher.

"Basically, it's been a real hard time for me. Because when I do get a job, it's not a real high paying job," Wilcox said. "I have a difficult time relating to people and ... one job that I had that paid really good, I couldn't comprehend what I was supposed to do and how I was supposed to do it."

For veterans of all ages from the recent wars, the unemployment rate in 2009 was 10.2 percent. Historically, younger veterans have had more difficulty than their older counterparts finding a job because they often have less training and job experience. Some joined the military right out of high school.

Lisa Rosser, an Army veteran and company owner who sits on the advisory board of the Call of Duty Endowment that funds projects focused on veterans employment issues, said she encourages veterans to emphasize to prospective employers what they learned about managing people in a stressful combat environment.

"If they talk about their general leadership skills and their ability to supervise and to manage people, especially at a very young age, that is a good sell ... because the average 24-year-old and 27-year-old in the military has similar supervisory and managerial experience as someone in their 30s on the civilian side," Rosser said.

One possible solution is to make it easier for veterans to transfer certifications they have for jobs they did in the military into the civilian workforce, Sharpe said.

The Labor and Veterans Affairs departments have a variety of programs addressing the problem, including one that educates employers about how to work with veterans with special needs. The hope is that another program, the Post-9/11 GI Bill rolled out last year, will be particularly effective. Under it, $78 billion is expected to be paid out in education benefits over the next decade for veterans of the recent wars to attend school.

The national unemployment rate last year was 9.3 percent, the highest since 1983.

Bob Shallit: IRS visits Sacramento carwash in pursuit of 4 cents

It was every businessperson's nightmare.

Arriving at Harv's Metro Car Wash in midtown Wednesday afternoon were two dark-suited IRS agents demanding payment of delinquent taxes. "They were deadly serious, very aggressive, very condescending," says Harv's owner, Aaron Zeff.

The really odd part of this: The letter that was hand-delivered to Zeff's on-site manager showed the amount of money owed to the feds was ... 4 cents.

Inexplicably, penalties and taxes accruing on the debt – stemming from the 2006 tax year – were listed as $202.31, leaving Harv's with an obligation of $202.35.

Zeff, who also owns local parking lots and is the president of the Midtown Business Association, finds the situation a bit comical.

"It's hilarious," he says, "that two people hopped in a car and came down here for just 4 cents. I think (the IRS) may have a problem with priorities."

Now he's trying to figure out how penalties and interest could climb so high on such a small debt. He says he's never been told he owes any taxes or that he's ever incurred any late-payment penalties in the four years he's owned Harv's.

In fact, he provided us with an Oct. 22, 2009, letter from the IRS that states Harv's "has filed all required returns and addressed any balances due."

IRS spokesman Jesse Weller isn't commenting "due to privacy and disclosure laws."

Zeff says he's as offended as much as anything else by what he considers rude behavior by the IRS guys. While at Harv's, he sniffs, "they didn't even get a car wash."

Testing the market

One of the region's best-regarded business sites could soon have a new owner.

Lowe Enterprises in February solicited bids for its five-building Prospect Green complex and the nearby stand-alone One Capital Center building in Rancho Cordova.

Asking price: About $75 million for the 640,000 square feet of space – a significant discount on the $103 million Los Angeles-based Lowe and its partner, JP Morgan, paid in 2005.

The bids were due Friday. We'll hear shortly if any came close to what Lowe and its partner are seeking.

Why are they selling now in a depressed market?

Institutional money is redeploying assets to "first-tier markets," like San Francisco and L.A, where price appreciation is likely to be swiftest when the market improves, says Nico Coulouras, Lowe's head of NorCal operations.

Retail wrangler

Wanted: a "champion" for downtown retail development.

That's the short job description for a retail recruiter now being sought by the Downtown Sacramento Partnership.

"We've talked retail recruitment for a long time," says DSP exec Michael Ault. But now his group is putting some money behind the task by hiring an expert who can work full time with property owners, brokers and city economic development folks to lure trendy retailers to the 66-block downtown district.

Hiring such a person was one of the top recommendations of consulting firm Downtown Works, which last year helped develop a strategy to reinvigorate the downtown area.

Ault says the DSP hopes to have somebody onboard by the end of April.

© Copyright The Sacramento Bee. All rights reserved.

US couple take lead on carbon trade by selling their first credit

While a bill to establish a cap-and-trade system has stalled in the US Senate, individuals keen to tackle carbon emissions should consider the example of Tami and Randy Wilson.

The Pennsylvania couple have sold the world's first carbon credit awarded for a reduction in personal carbon emissions. About 1,800 others have signed up to follow suit - underlining the US public's readiness to press ahead on the issue.

The Wilsons began by getting rid of their son's heated water bed, turning off power to computers and televisions when not in use, changing to energy-efficient light bulbs, hang-drying their laundry and, finally, investing $58,000 (€42,000 £37,000) in a solar panel system - until they reduced their electricity bill to zero.

Then they signed up on the MyEmissionsExchange. com site to have their energy savings calculated. They found that they had already saved one tonne of carbon, which earned them a carbon credit. The exchange sold the credit for $21.50 to Molten Metal Equipment Innovations of Ohio, taking a 20 per cent commission.

"Everybody wants to be environmentally friendly," said Ms Wilson, 49, a water treatment plant operator. "It takes a trigger point to get people involved. For us it was the announcement of a 30 per cent increase in our electricity bill."

MyEmissionsExchange. com, owned by the energy broker Oceans Connect, is hoping that other individuals will not only want to be paid for their energy savings but that companies will be keen to buy credits easily verified by comparing a family's improving power bills.

While purchasing a single credit is insignificant, the MyEmissionsExchange site is hoping that expectations for carbon legislation and public interest in limiting climate change will enable it to build scale.

"If we think big, we don't have to rule out ExxonMobil buying credits," said Paul Herrgesell, project manager at the website.

MyEmissionsExchange began trying to help individuals to enter the carbon market in October, and executed the Wilsons' sale last month. The site, which verifies and sells personal carbon credits, is open to any individual household or business that wants to earn a personal carbon credit by demonstrating it has reduced its electric, natural gas, propane or fuel oil bill compared with the same month a year earlier.

The problem with such schemes, say many market experts, is that it is so hard to verify whether genuine carbon reductions have taken place, and to quantify them.

"This is good to raise awareness and to mobilise people to personally act against climate change,'' said Davide Vassallo, director at Arthur D. Little, the consultancy. "But I don't believe we will have a market here.''

The US authorities have yet to require a reduction in carbon emissions. He pointed out that the largest carbon credits markets were based mainly on the cap-and-trade system, where regulation created the demand to procure credits.

Paul Cooper, president of Molten Metal Equipment Innovations, which makes pumping equipment for the recycling industry, said the company would buy more credits if they became available, given its support of energy conservation.

"Without corporations involved, it won't take off," he added.

The Stimulus Scam

The recent improvement of the global economy, with particularly high economic-growth numbers for the United States, is just one more deception in a long series of deceptions that have plagued policy makers and investors. While official statistics register a rising gross domestic product, the long-term production potential of many economies around the world is actually contracting. The present economic expansion is brought about by massive stimulus policies. This kind of economic expansion does not constitute genuine economic growth.

It is quite common for policy makers, economic analysts, and commentators of all kinds to fail to distinguish between economic growth, which enlarges the productive capacity of an economy, and mere expansion of demand. Yet there is a huge difference between the kind of economic growth that comes as a consequence of victories in the battle against scarcity and the kind that is merely an output expansion resulting from increased spending.

The Austrian business-cycle theory emphasizes the problem of intertemporal misallocation due to monetary and fiscal stimuli. According to Austrian economic theory, stimulus packages induce the launch of projects that are bound to fail because their completion will be cut short by the lack of sustainable funding. In the short run, stimulus policies will bring an increase of the nation's gross domestic product, yet what matters for long-term economic growth is not credit-induced demand but the nation's capacity for production.

There is general agreement in the economics profession that the much-vaunted expenditure multiplier of Keynesian theory has quite different real and monetary effects depending on the state of the economy. However, the negative impact of stimulus policies on productivity is much less understood. When the economy expands due to fiscal or monetary stimulus, the productive capacity of the economy will actually decrease because the artificial expansion will mainly encourage malinvestment, i.e., the pursuit of business projects that are not viable in the long run.

It is easy indeed to fall into the trap of phony economic growth; as long as capacity utilization is below the normal level, demand expansions fueled by monetary and fiscal impulses increase economic activity. But the more the economy approaches full capacity, the more the effect on the production of real goods gets weaker and the effect on prices gets stronger. Eventually, this reaches the point when the monetary expansion only has inflationary price effects, and its impact on real production becomes nil.

When distortions in the economy are still small, and only a minor recession would be necessary to correct the misallocation, a modest amount of monetary or fiscal stimulus often will be sufficient to make the boom continue; this represents another source of deception. Central bankers and finance ministers enjoy praise for this cheap feat of having prevented what would otherwise have been only a mild and short slump. Yet by not letting mild recessions happen, these policy makers heap one pile of economic distortions upon another until the big downturn becomes unavoidable.

When finally confronted with the threat of a severe depression, these same authorities fall into panic. Acting in fear, they tend to deny experience and to flout prudence and rationality. In the face of a major economic downturn, monetary authorities resort to flooding the economy with even more easy money. Furthermore, their deficit spending heaps new debt upon old debt.

"There is a huge difference between the kind of economic growth that comes as a consequence of victories in the battle against scarcity and the kind that is merely an output expansion resulting from increased spending."

This pattern, which can be observed in many parts of the world, has also characterized US economic policy. By avoiding the small slump that most likely would have come after the stock-market crash of 1987, US monetary policy became highly expansive. It has continued that way ever since. Along the way, one bubble has followed the next, and consequently one bailout has led to the next.

After the economic dip of 2000, the US central bank's loose monetary policy laid the groundwork of the housing bubble. When the bubble burst, government implemented a series of stimulus packages, and monetary authorities set the interest rate down close at the zero bound. As of now, new packages are on their way and the Federal Reserve's reluctance to initiate its exit strategy is all too obvious.

As the collapse of the real-estate markets in the United States demonstrated, the credit boom has produced misallocations on a massive scale. The costs of many houses that were built when loans appeared easy to finance turned out to be unbearable. Projects that seemed to be financially manageable during the time of easy money had to be abandoned when the reality of scarcity was revealed. Investors and consumers were forced to retrench. Capital was lost, yet the debt burdens remain, and the fallout is felt throughout the entire economy.

As if economic history is to repeat itself, with each cycle getting worse, policy makers around the world repeat the old mistakes again and again. They have embraced, almost in unison, the rather crude belief that low interest rates and government spending will create wealth.

In the 1970s, in the face of the first oil-price shock, many governments and economists had great expectations of the stimulus policies in Europe and the United States. But the result was global stagflation. Japan practiced fiscal and monetary expansion on a grand scale since its economy entered a recession in the early 1990s, and the result has been stagnation ever since.Download PDF

Despite the colossal efforts to sustain the boom in Japan, Europe, and the United States, the systemic fragilities of the global financial markets have not vanished, and business bankruptcies and unemployment are on the rise. What has been accomplished, however, is the formation of unsustainable levels of debt and of excess reserves in the banking sector, which could explode at any moment into a surge of inflation.

Fabricating bogus economic growth is highly appealing to policy makers because they can easily produce such "growth" by wasteful consumption for war, welfare, and all kinds of popular government programs. Each stimulus package at first incites irrational jubilation but leaves behind a wasteland of failed projects and frustrated expectations. This mental discouragement of investors and consumers will linger on for years after the boom has ended.

While monetary spending is limitless, and there is no scarcity of zeros to add to the price tag, production remains limited by the scarcity of the factors of production.

Fake booms and their consequent busts are directly linked to financial cycles, which in turn reflect the swings in money creation.Download PDF Fiat money lies at the heart of this process. Credit-based economic expansion and its consequent malinvestments create economic illusions.Download PDF The true tragedy of a fiat money regime is that bogus economic growth by way of monetary and fiscal stimulus can go on only until either the collapse of hyperinflation brings an end to the artificial boom or the amount of accumulated debt makes state bankruptcy inevitable.

Are 9/11 first responders being tricked?

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Jesse Ventura Shattering the Left / Right Paradigm on Alex Jones

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